Archive for August, 2015

The Real Costs Of Selling Your Duplex Yourself

said on August 24th, 2015 categorized under: Selling A Duplex

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Sell Your Duplex YourselfBy now, you’ve probably heard it’s been a little bit of a duplex sellers market.

And perhaps you’ve been thinking if duplexes are selling so quickly, maybe you could try selling it yourself.

Many duplex owners would like to “save the commission” charged by Realtors. After all, an average commission may run around 6 percent. On a $200,000 house, that’s $12,000, right?

You may even have heard there are services out there that, for a fee, will help you get your duplex on the multiple listing service (MLS), and help you on an a la carte basis.

This is true. But have you ever totaled all their fees and charges up? Let’s compare an average Realtor’s commission, with the cost of selling it yourself.

Here in the Twin Cities, there’s a service that has a sliding scale for “For Sale By Owner” services. To put your property on the MLS, enter the description, “share” it with top websites (which the MLS shares automatically) and upload six photos to the MLS, this company charges $399.

$12,000 – $399 = $11,601.

Now, if your property is on the MLS, then you are advertising for agents to bring buyers. If an agent does, then their broker expects you to compensate them for helping sell your house. On average, the payout for a buyer’s agent’s commission on the sale of a $200,000 house is $5,400.

$12,000- $399 – $5400 = $6201.

Now let’s imagine you want a few more photos on the MLS, and even 25 color brochures, a yard sign, and some open house signs. For that, the service will charge you $698.

So, $12,000 – $698 – $5400 = $6102.

Better yet, let’s imagine you want a lockbox, signs, twice as many brochures, a professional photo shoot, listing in the open house directory and even a duplex market analysis. How much is that? $2895.

$12,000- $2895 – $5200 = $3905.

So, in exchange for doing all of the leg work yourself to sell your duplex, you save $3905. That’s pretty good, right?

Absolutely, except for two key points.

1. If your duplex doesn’t sell, you paid $2895 for nothing. An agent and all the services he or she provides is absolutely free to you until your property sells. No upfront money to take out of your savings account or add on to your credit card.

2. One of a Realtor’s most important jobs is to negotiate on your behalf. As an experienced agent, I am confident I can negotiate $4000 more for your duplex than you can pocket on your own. And if I don’t, you don’t even have to pay me for it.

According to a National Association of Realtors survey, in 2013, only 9 percent of all houses sold with the owners selling it themselves. These properties typically had a lower median selling price. In fact, it was 13 percent lower.

Have you ever tried to save a little, and it ended up costing you a lot?

This could too.

How To Use The Fair Housing Act To Screen Tenants

said on August 17th, 2015 categorized under: Buying A Duplex, Tenants

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duplex tenant screeningI am in the process of renting a vacant unit I just got done rehabbing.

As I look for a new tenant, I am trying to use my experience with the last residents to guide me.

Frankly, there were warning signs with those people the day they applied to rent the unit that I didn’t heed.

And I’ve since come to the conclusion that had I simply had written criteria for tenant selection present at the property when they applied, they may never have even filled out the paperwork.

The federal Fair Housing Act prohibits landlords from discriminating against a prospective tenant due to race, color, national origin, religion, sex, disability, and familial status. State laws (depending on where you live) may go further. In Minnesota, for example, landlords may also not prohibit someone from renting due to creed, sexual orientation or public assistance.

The easiest and best way to make sure to be in compliance with these laws is to have a written set of criteria as to what you are looking for in a tenant. This list is just a set of guidelines available for prospective tenants to view before applying for the property.

For example, these guidelines may include things like:

  • Must have no criminal background.
  • Must have no prior evictions.
  • Must have verifiable employment history.
  • Must have landlord references.
  • Must have a minimum credit score of 600 (or whatever number is acceptable to you).
  • Must provide a copy of a drivers license.
  • Must provide an application fee (equal to the amount the company you use charges for a background check)
  • Maximum percentage monthly rent must be to income.

It is the last item on the list that would have saved me the challenges caused by my last tenant. After paying rent, they were left with about 40 percent of their monthly income to live on. I discussed this with them at the time, voicing my concern, but didn’t have it clearly stated as a barrier to application.

They were persuasive, and I didn’t stick to my guns. Of course, as soon as life threw them a curve, it affected their ability to pay rent.

Looking back, I wonder if I’d had the written criteria stapled to the application like I do now they would have even applied.

Lesson learned. Not only does having this information on hand protect me from the risk of being accused of discrimination, it would have saved me court costs, rehab costs and all the lost income from the months the property was vacant and being repaired. The tenants who talked me into renting simply wouldn’t have applied in the first place.



Should You Pay Off Your Debt Before You Buy A Duplex?

said on August 11th, 2015 categorized under: Financing

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Erase Debt before buying a duplexIf you’re thinking of buying your first rental property, you probably think it’s a good idea to pay down some of your debt before you speak with either a Realtor or a lender.

After all, the bank isn’t going to want to lend you the money to buy a property if you have a lot of debt, right?

Not necessarily.

In many cases, it is actually more important to save your money for a down payment and closing costs.

Underwriters, who are the people who review your financial situation before approving a loan, often don’t care as much about the balance on your loans as they do the amount of your monthly payments. And unless the payments are on an installment loan– like on a car, or a student loan, odds are paying down the balance isn’t going to make that much of a difference in your monthly expenses.

See, underwriters know that you can bring the balance right back up on your credit card after closing. This, of course, would make it more difficult for you to make your payments.

Underwriters would rather see money sitting in your bank account.

Before you begin your search for a duplex, it’s a good idea to visit with a loan officer to determine exactly what the best strategy may be for your financial situation.